aggregate supply Flashcards
what is aggregate supply
the total planned output of goods and services that firms in an economy are willing and able to supply(produce) at a given price level.
what is in the long run
there is a limit to how much output can be produced
what are the four main points of a long run AD curve
- cannot exceed capacity for a long time
- capacity doesn’t depend on cost/price
- AS is perfectly inelastic as it is independent of price
- vertical LRAS curve
what does LRAS stand for
long run aggregate supply
what is full employment
the level of output where all available factors of production are engaged in the production process (Y FE)
what does full employment represent
it represents maximum capacity
what are inactive resources
when they aren’t involved in the production process (capable but not willing)
where on a PPF is it full employment
any point on the PPF
what will cause a long run aggregate supply shift
if there is a change in the productive potential of an economy due to a change in the quality and/or quantity of a factor of production.
what causes a long run aggregate supply curve to shift left
a decrease in the quantity and/or quality of a factor of production
what causes a long run aggregate supply curve to shift right
an increase in the quantity and/or quality of a factor of production
what are the three quantities of land
- discover new resources
- land reclamation
- extend boundaries
what are the two qualities of land
- irrigation
- flood defences
what are the three quantities of labour
- birth rates
- higher retirement age
- immigration/emigration
what are the two qualities of labour
- education
- training
